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From Bloomberg to Snoopberg

The shock news of the day, or not, is that Bloomberg’s
reporters have been spying on their customers.

Or that’s the suspicion anyway, and was kicked off by
Goldman Sachs complaint that a reporter from Bloomberg had telephoned to find
out why an employee of the bank had not logged on to their Bloomberg terminal
yet.  Had they lost their job?

Apparently, reporters at Bloomberg did the same in 2012 when
trying to find out what was going on at JPMorgan over their London Whale  incident.  There are also concerns that they may have
been tracking Tim Geithner, US Treasury Secretary, and Ben Bernanke, Head of
the Federal Reserve.

This could be big, but it’s an issue that Bloomberg has been
familiar with since the start of reporting news through their terminals.

From the Financial Times:

Michael Bloomberg’s
autobiography recalled pitching the idea of adding news to his financial data
terminals to Matt Winkler, the man who ended up running Bloomberg News.

Mr Winkler replied by
asking how Bloomberg would react if the newswire found out that the chairman of
its biggest client had run off to Rio de Janeiro with $5m from the company
coffers and the company called up to kill the story?

“I certainly hadn’t
thought about the ethical conundrums we might come up against,” Mr Bloomberg
wrote, but “our first conversation dwelt almost exclusively on that topic.”

He went on to write:

“Most news
organisations never connect reporters and commerce. At Bloomberg, they’re as
close to seamless as it can get … I’m proud of the balance we maintain
between the dollar sign and the written word.”

The issue came to light after Goldman Sachs complained about
reporter’s monitoring user activity.

From CNBC:

The company confirmed
that reporters at Bloomberg News had used the company's terminals to monitor
when subscribers had logged onto the service and to find out what types of
functions, like the news wire, corporate bond trades or an equities index, they
had looked at.

Bloomberg said the
functions that allowed journalists to monitor subscribers were a mistake and
were promptly disabled after Goldman Sachs complained that a Bloomberg reporter
had, while inquiring about a partner's employment status, pointed out that the
partner had not logged onto his Bloomberg terminal lately.

But the scandal was exacerbated by the fact that this is not
just a one-off, but a systemic issue in Bloomberg when JPMorgan reported the
same issue.

From Business Insider:

Bloomberg broke the
news that a team of JPMorgan traders in London had made a massive bet on credit
derivatives — a bet so big that it was causing distortions in the market.
Bloomberg was also the first organization to name the trader responsible for
this bet: Bruno Iksil.

Later, in a timeline
of the Whale scandal, Bloomberg bragged
about its leadership on this story.

When news of the Whale
trade became public, it encouraged other market participants to bet against
JPMorgan, which likely contributed to the firm ultimately losing billions of
dollars on the trade.

A source within
JPMorgan says that the firm believes that, at the very least, Bloomberg News
reporters used private login information on the Bloomberg terminal to determine
that Bruno Iksil had left JPMorgan.

In light of the accusations Matthew Winkler, who heads up
Bloomberg News, issued a statement as follows:

Holding Ourselves

We are defined by our
words — and they applied to us when a Bloomberg LP customer expressed concern
that Bloomberg News reporters had access to limited client information. Our
client is right. Our reporters should not have access to any data considered
proprietary. I am sorry they did. The error is inexcusable. Last month, we
immediately changed our policy so that reporters now have no greater access to
information than our customers have. Removing this access will have no effect
on Bloomberg news-gathering.

Now let’s also be
clear what our reporters had access to. First, they could see a user’s login
history and when a login was created. Second, they could see high-level types
of user functions on an aggregated basis, with no ability to look into specific
security information. This is akin to being able to see how many times someone
used Microsoft Word vs. Excel. And, finally, they could see information about
help desk inquiries.

Why did reporters have
access to this in the first place? The recent complaints go to practices that
are almost as old as Bloomberg News. Since the 1990s, some reporters have used
the terminal to obtain, as the Washington Post reported, “mundane” facts such
as log-on information. There was good reason for this, as our reporters used to
go to clients in the early days of the company and ask them what topics they
wanted to see covered. Understanding how clients used the terminal was more
important then. We still do that today, which is why we have feedback tabs on
our news-related terminal functions. Equally important is our commitment to
transparency, which is why “The Bloomberg Way” is a public document.

As we’ve grown, and as
data privacy has become a central concern to our clients, we should go above
and beyond in protecting data, especially when we have even the appearance of
impropriety. And that’s why we’ve made these recent changes to what reporters
can access.

This leads to a second
point lost in much of this weekend’s conversation: The protection of important
customer data has been essential at Bloomberg since our founding more than 30
years ago. We have never compromised the integrity of that data in our

At no time did
reporters have access to trading, portfolio, monitor, blotter or other related
systems. Nor did they have access to clients’ messages to one another. They
couldn’t see the stories that clients were reading or the securities clients
might be looking at.

Like all other
Bloomberg employees, our reporters, upon hiring, enter into a confidentiality
agreement that strictly prohibits them from discussing non-public Bloomberg
documents and proprietary information about the company and its clients in
their reporting.

Our editorial and
reporting standards have been among the most stringent in the business for more
than 20 years. We apologize for our error as it does not reflect on our culture
or our heritage. And we will strive to continue to uphold the highest standards
while adhering to the best practices in the industry as long as we may be
fortunate to serve our customers as they would have us serve them.

Hmmm … there is an obvious conundrum here, especially when
you are a near monopoly in information provision on financial markets: you own
the data so you can own the markets?

What would stop Bloomberg’s people investing and following
the investment strategies of their most successful clients?

Why wouldn’t news reporters incentivised to uncover news,
scour their clients’ digital footprints to find scoops?

Obviously, a code of conduct that determines behaviours, but
then the press code of conduct failed miserably in News International’s phone
hacking scandal

Is this the financial markets News International moment?

Will Thomson Reuters be questioned in the same manner?

Let’s see, but it’s certainly the case that if information is
power and power leads to corruption, then something will go amiss somewhere.




About Chris M Skinner

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here…

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